856 F.

2d 388
62 A.F.T.R.2d 88-5549, 88-2 USTC P 9504,
27 Fed. R. Evid. Serv. 38

UNITED STATES of America, et al., Plaintiffs, Appellees,

v.
LAWN BUILDERS OF NEW ENGLAND, INC., and James T.
Shadoian,
Defendants, Appellants.
UNITED STATES of America, et al., Plaintiffs, Appellees,
v.
James T. SHADOIAN, Defendant, Appellant.
Nos. 88-1174, 88-1411.

United States Court of Appeals,

First Circuit.
Submitted June 30, 1988.
Decided Sept. 8, 1988.

James T. Shadoian, on brief, pro se in appeal No. 88-1174.

Donald W. MacPherson and MacPherson & McCarville, P.A., Phoenix,
Ariz., on brief, for defendant, appellant in appeal No. 88-1411.
William S. Rose, Jr., Asst. Atty. Gen., Gary R. Allen, Charles E.
Brookhart, William A. Whitledge, Tax Div., Dept. of Justice, Washington,
D.C., and Lincoln C. Almond, U.S. Atty., Providence, R.I., on brief, for
plaintiffs, appellees.
Before CAMPBELL, Chief Judge, BOWNES and TORRUELLA, Circuit
Judges.
PER CURIAM.

In these consolidated appeals, James T. Shadoian appeals a district court order

enforcing an Internal Revenue Service (IRS) summons (Appeal No. 88-1174)
and a district court order finding Shadoian in contempt for not complying with

its order of enforcement (Appeal No. 88-1411). We affirm.

Background
2

In May 1987, an IRS summons was issued directing Lawn Builders of New
England, Inc. (Lawn Builders) and its president, Shadoian, (the respondents) to
appear before an IRS revenue officer on June 1, 1987 and produce for
examination the corporate records of Lawn Builders.1 See 26 U.S.C. Sec. 7602.
According to the summons, the IRS was conducting an investigation into Lawn
Builder's tax liability for the years 1984, 1985 and 1986.

Shadoian appeared on June 1, 1987 and sought to taperecord the session. The
revenue officer refused to allow the taperecording. Shadoian did not produce
any records. The appearance was continued to July 9, 1987, but Shadoian failed
to appear.

The IRS petitioned the district court in November 1987 for enforcement of the
IRS summons. See 26 U.S.C. Secs. 7402(b) and 7604(a). The district court
ordered the respondents to appear before the court on January 8, 1988.

At the district court hearing on January 8th, the respondents, with Shadoian
acting on his own behalf as well as on behalf of Lawn Builders, objected to the
enforcement of the IRS summons on the ground that Shadoian and Lawn
Builders have a Fifth Amendment privilege against self-incrimination. The
district court ruled that the corporation has no Fifth Amendment privilege and
ordered Lawn Builders, through one of its officers or a duly authorized agent, to
comply with the summons by appearing before the IRS on February 4, 1988.
The respondents appealed that order on January 25, 1988. See Reisman v.
Caplin, 375 U.S. 440, 449, 84 S.Ct. 508, 513, 11 L.Ed.2d 459 (1964) (a district
court order enforcing an IRS summons is a final, appealable order). The
respondents mailed a copy of the notice of appeal to the IRS with a notation
that "[b]ecause of the appeal, I would like to inform you, therefore, that I will
not be appearing on February 4, 1988."

The respondents did not petition the district court for a stay of its order and did
not appear before the IRS as ordered on February 4th. The IRS subsequently
moved for an order holding the respondents in contempt for failing to obey the
district court order. The district court ordered the respondents to appear before
it on March 25, 1988. The respondents then filed a "motion to dismiss for lack
of jurisdiction or for stay of the proceedings," in which respondents contended
that they were entitled to appellate review of the enforcement order before any

contempt sanctions could be imposed, and therefore concomitantly, the district

court was without jurisdiction to impose contempt sanctions before such
appellate review had occurred.
7

The district court rejected the respondents' arguments, based on their failure to
apply for and obtain a stay of the enforcement order. The district court found
the respondents in contempt and ordered compliance with the terms of the IRS
summons by April 1, 1988. The district court warned Shadoian that he would
be incarcerated if he failed to comply. The respondents filed a petition for
mandamus in this court on March 31, 1988, asking for an order directing the
district court to vacate its order of contempt and to stay its proceedings. The
respondents contended, as they had before the district court, that the district
court had no jurisdiction to find them in contempt while the respondents' appeal
of the enforcement order was pending in this court. We denied the petition for
mandamus that same day. On April 1, 1988, the respondents moved in the
district court for reconsideration of its contempt order, which was denied. The
respondents failed to comply with the order of enforcement and the district
court ordered Shadoian incarcerated for six months or until such time as
Shadoian "produce[s] the required tax records."

Shadoian next filed a motion in this court for a stay of the district court order of
contempt and of the subsequent incarceration. We denied the motion for stay
since Shadoian had not filed any appeal from the contempt order. Shadoian
then filed a notice of appeal on April 25, 1988. He moved again for a stay of
the contempt order and for release of incarceration pending appeal. We
consolidated the appeals from the orders of enforcement and contempt and we
stayed the order of incarceration pending the appeal. After Shadoian filed a pro
se brief in his appeal from the enforcement order (No. 88-1174), he retained
counsel who filed a brief in his appeal from the contempt order (No. 88-1411)
and a reply brief under both docket numbers.

Order of Enforcement
9

The Supreme Court has identified several, although not necessarily exclusive,
requirements for the enforcement of an IRS summons. "First, the summons
must be issued before the Service recommends to the Department of Justice
that a criminal prosecution, which reasonably would relate to the subject matter
of the summons, be undertaken." United States v. LaSalle National Bank, 437
U.S. 298, 318, 98 S.Ct. 2357, 2368, 57 L.Ed.2d 221 (1978); see 26 U.S.C. Sec.
7602(c). Second, the IRS must meet the standards of good faith set out in
United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964). Id.
That is, "that the investigation will be conducted pursuant to a legitimate

purpose, that the inquiry may be relevant to the purpose, that the information
sought is not already within the [IRS] Commissioner's possession, and that the
administrative steps required by the [IRS] Code have been followed." United
States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112
(1964). In addition, the IRS must not have abandoned the pursuit of civil tax
determination or collection. United States v. LaSalle National Bank, 437 U.S.
at 318, 98 S.Ct. at 2368.
10

The petition to enforce the summons, filed by the government, alleged the
above-described requirements and was accompanied by an affidavit of the
revenue officer conducting the investigation, which reiterated the petition's
claims. "Assertions by affidavit of the investigating agent that the requirements
are satisfied are sufficient to make the prima facie case." Liberty Financial
Services v. United States, 778 F.2d 1390, 1392 (9th Cir.1985); accord Matter of
Newton, 718 F.2d 1015, 1019 (11th Cir.1983), cert. denied, 466 U.S. 904, 104
S.Ct. 1678, 80 L.Ed.2d 153 (1984); United States v. Kis, 658 F.2d 526, 536
(7th Cir.1981), cert. denied, 455 U.S. 1018, 102 S.Ct. 1712, 72 L.Ed.2d 135
(1982); United States v. Garden State Nat. Bank, 607 F.2d 61, 68 (3d
Cir.1979).

11

Shadoian does not challenge the IRS' showing as to any of these requirements.
Rather, Shadoian argues that the IRS must prove that the documents sought by
the summons exist. Further, Shadoian contends that, although paragraph VI of
the petition alleged that the respondents are in possession and control of
documents concerning the investigation, his answer sufficiently denied that
allegation and his Fifth Amendment right protects him from any further inquiry
as to the existence, possession or control of those documents. As Shadoian sees
it, the failure of the IRS to prove the existence of the documents as well as his
assertion of a Fifth Amendment privilege against self-incrimination required the
district court to deny enforcement of the summons.

12

Shadoian is incorrect. We have previously rejected the contention that the IRS
must prove by positive evidence the existence of the records and their
possession by the summonee. United States v. Freedom Church, 613 F.2d 316,
322 (1st Cir.1979); see also McPhaul v. United States, 364 U.S. 372, 378-80,
81 S.Ct. 138, 142-43, 5 L.Ed.2d 136 (1960) (criminal conviction for willful
failure to comply with Congressional subpoena upheld--evidence of
Subcommittee's reasonable basis for believing that petitioner could produce the
records in question, coupled with the evidence of his failure even to suggest to
the Subcommittee his inability to produce those records, clearly supported an
inference that he could have produced them. The burden then shifted to
petitioner to present some evidence to explain or justify his refusal); cf. United

States v. Antonio J. Sancetta, M.D., P.C., 788 F.2d 67, 72 (2d Cir.1986)
(summonee has burden of proving records' nonexistence or that he does not
possess them); but cf. United States v. Rue, 819 F.2d 1488, 1493 n. 4 (8th
Cir.1987) (burdens of production and proof on question of existence,
possession, and authenticity of summoned documents are on the government).
We are of the opinion that the district court had sufficient reason to believe that
the documents sought existed and that Shadoian had actual or constructive
possession of them. The documents sought were the sort of records which one
would expect a corporation to routinely create, see footnote 1 supra, and in the
answer filed in response to the petition for enforcement, Shadoian admitted the
existence of the corporation, his status as its president and the fact that both he
and the corporation could be found at the same address.2
13

"Once the district court has reason to believe that the requested documents
exist, the burden then shifts to the summonee to show that he is not in
possession of them." United States v. Freedom Church, 613 F.2d at 322 (citing
Angiulo v. Mullins, 338 F.2d 820, 822 (1st Cir.1964)), cert. denied, 380 U.S.
963, 85 S.Ct. 1108, 14 L.Ed.2d 154 (1965); see also United States v. Huckaby,
776 F.2d 564, 567 (5th Cir.1985), cert. denied, 475 U.S. 1085, 106 S.Ct. 1468,
89 L.Ed.2d 724 (1986) (government need not introduce evidence that
summonee actually possesses the requested documents as part of its initial
showing seeking the enforcement of an IRS summons; lack of possession or
control of summoned documents is a valid defense to application for
enforcement order as to which party resisting enforcement bears burden of
producing credible evidence that he does not possess or control the documents
sought). Shadoian never affirmatively stated that he did not possess or control
the requested documents. In response to the petition's allegation that the
respondents were in possession and control of the sought-after documents, the
respondents answered that they "lack[ ] knowledge or information sufficient to
form a belief as to the truth of said matter, and thereby den[y] the same." Both
in the answer to the petition and in his argument at the enforcement hearing
before the district court, Shadoian further relied on an alleged Fifth
Amendment privilege as the basis for refusing to admit or deny either the
existence of the documents or his possession or control of the same.

14

While a valid invocation of a Fifth Amendment privilege may relieve the

summonee from answering questions, see United States v. Rylander, 460 U.S.
752, 758, 103 S.Ct. 1548, 1553, 75 L.Ed.2d 521 (1983), we believe that the
district court correctly determined that Shadoian's invocation of a Fifth
Amendment right was misplaced. Contrary to Shadoian's persistent assertion,
the government is not seeking any oral testimony forcing him "to disclose the
contents of his own mind." Curcio v. United States, 354 U.S. 118, 128, 77 S.Ct.

1145, 1151, 1 L.Ed.2d 1225 (1957). In Curcio, the Supreme Court upheld the
Fifth Amendment right of a custodian of a union's books and records to refuse
to answer questions, pursuant to a personal subpoena ad testificandum, as to the
whereabouts of books and records which he had not produced pursuant to a
subpoena duces tecum addressed to him in his capacity as secretary-treasurer of
the union. Id. The Court was careful to point out that the petitioner in Curcio
was prosecuted for failure to answer questions pursuant to the personal
subpoena ad testificandum and not for failure to produce the documents
demanded in the subpoena duces tecum. Id. at 121, 77 S.Ct. at 1148. The Court
indicated that a prosecution for failure to produce the records demanded by the
subpoena duces tecum would have been proper and that the objectional nature
of the testimony sought was that it was "more than 'auxiliary to the production'
" of the unprivileged records. Id. at 124-28, 77 S.Ct. at 1149-52 (quoting
United States v. Austin-Bagley Corp., 31 F.2d 229, 234 (2d Cir.1929)). We
note that the custodian had testified that he was the union's secretary-treasurer;
that the union had books and records; but that they were not then in his
possession. Id. at 119, 77 S.Ct. at 1147.
15

In the present case, the summons was not directed at Shadoian as an individual,
but rather was directed at Lawn Builders, the corporation, and Shadoian as its
president. The summons sought only the production of corporate records. It is
well-settled that a corporation has no Fifth Amendment privilege to refuse to
produce corporate records. United States v. White, 322 U.S. 694, 699, 64 S.Ct.
1248, 1251, 88 L.Ed. 1542 (1944). Shadoian seeks refuge in caselaw which
recognizes that the act of producing documents may have incriminating aspects,
permitting the proper invocation of the privilege. See Fisher v. United States,
425 U.S. 391, 410, 96 S.Ct. 1569, 1580, 48 L.Ed.2d 39 (1976). That caselaw is
unavailing to Shadoian, however. To the extent that any act of production or
non-production is an implicit representation of their existence/non-existence
and possession or control by Shadoian, that representation, in this case, does not
result from any impermissible questioning by the government which is more
than auxiliary to the production of unprivileged records. A summons is
enforceable against a custodian of corporate documents despite the fact that
producing the documents tacitly admits their existence and location in the
hands of the possessor. Id. at 411-12, 96 S.Ct. at 1581-82. Further, when an
agent of a corporation fails to produce documents that are the subject of a valid
summons, he must give sworn testimony that he does not possess them. United
States v. O'Henry's Film Works, Inc., 598 F.2d 313, 318 (2d Cir.1979). A
statement of non-possession is auxiliary to the duty to comply with the
summons and that statement is not subject to any Fifth Amendment privilege.
Id. We believe it was proper to presume Shadoian, as president and corporate
officer, to be the custodian of the corporate records unless he presented

evidence otherwise. "When the appellant became president of the corporation

and as such held and used its books for the transaction of its business
committed to his charge, he was at all times subject to its direction, and the
books continuously remained under its control. If another took his place his
custody would yield. He could assert no personal right to retain the corporate
books against any demand of government which the corporation was bound to
recognize." Wilson v. United States, 221 U.S. 361, 385, 31 S.Ct. 538, 546, 55
L.Ed. 771 (1911).
16

Likewise, United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552
(1984) is of no aid to Shadoian's argument on appeal. In Doe, the Court
determined that the act of producing business records of a sole proprietorship
was privileged as that act would involve testimonial self-incrimination as to
their existence, possession and authenticity. Id. The present case concerns a
corporation, not a sole proprietorship. Although Shadoian states on appeal that
he is the "sole owner of this professional corporation" (Brief in No. 88-1174 at
page 10), he, at no time, raised this allegation in the court below or argued that
he was sole shareholder and officer or, in other words, that Lawn Builders was
a so-called "one-man corporation." In fact, the transcript of the enforcement
hearing of January 8, 1988 indicates that initially the government issued three
summons, one for the personal records of James T. Shadoian, one for the
personal records of Donald Shadoian, James's brother, and one for the corporate
records of "their" corporation. (Tr. at p. 2.) The government conceded that both
James and Donald had validly interposed Fifth Amendment privileges as to
their personal records and no issue is raised in this appeal as to those matters.
Nonetheless, it is unclear what role, if any, Donald Shadoian has with respect to
this corporation.

17

In any event, even assuming Lawn Builders to be a one-man corporation and

James T. Shadoian to be that one man, the corporate records are not shielded
from production, nor may Shadoian resist a subpoena for those records on the
ground that the act of production would impermissibly infringe on his Fifth
Amendment right against self-incrimination. Braswell v. United States, --- U.S.
----, 108 S.Ct. 2284, 101 L.Ed.2d 98 (1988); In re Grand Jury Proceedings
(John Doe Co., Inc.), 838 F.2d 624 (1st Cir.1988). The enforcement order
requiring "[t]hat respondent Lawn Builders of New England, Inc., through one
of its officers or a duly authorized agent, shall comply with and obey forthwith
the summons, and each and every requirement thereof, served on it on May 19,
1987, and shall appear, through its officer or a duly authorized agent, and
produce the books, papers, records, or other data required and called for by the
terms of said summons, and the officer or duly authorized agent shall testify as
to the authenticity of said corporate books, papers, records, or other data ..." is

in accord with the caselaw. Id.

18

Shadoian, therefore, could not validly rely on a Fifth Amendment privilege to

defend against the petition for enforcement. There being sufficient evidence for
the district court to believe that the requested documents exist and Shadoian
having failed to carry his burden of producing evidence of his non-possession
or control, we affirm the district court's order of enforcement.

Order of Contempt
19

At the initial hearing on the government's motion for contempt, Shadoian

argued solely that the district court lacked jurisdiction to hold him in contempt
because his appeal of the order of enforcement was still pending. The district
court correctly rejected this contention since Shadoian had neither applied for,
nor received, a stay of the district court's enforcement order. There being no
dispute that the enforcement order was not complied with, the court found
Shadoian in contempt of that order. The court stayed the order of contempt for
one week to allow Shadoian to comply.

20

One week later, a second hearing was held. No records had been turned over in
compliance with the order enforcing the IRS summons. At that time, Shadoian
stated affirmatively for the first time that the records were not in his possession
or control. Confusingly, Shadoian also attempted to argue that after stating that
he does not have the records, he can then assert a Fifth Amendment right "not to
testify whether they're in my possession or control or whether they exist or don't
exist."3

21

Lack of possession or control of records is a ground upon which to contest an

IRS summons. United States v. Rylander, 460 U.S. at 757, 103 S.Ct. at 1552. It
is properly raised in a proceeding to enforce the summons, but may not be
raised for the first time in a contempt proceeding. Id. "[A] contempt proceeding
does not open to reconsideration the legal or factual basis of the order alleged to
have been disobeyed and thus become a retrial of the original controversy."
Maggio v. Zeitz, 333 U.S. 56, 69, 68 S.Ct. 401, 408, 92 L.Ed. 476 (1948).

22

Although a defendant in a civil contempt proceeding cannot attack an

enforcement order on the ground that he lacked possession or control of the
records at the time the enforcement order issued, he may assert a present
inability to comply with the enforcement order. United States v. Rylander, 460
U.S. at 757, 103 S.Ct. at 1552. However, because there is a presumption of
continuing possession arising from the enforcement order, he is required to

come forward with evidence in support of his assertion. Id. at 760-61, 103 S.Ct.
at 1554-55. Shadoian continued to insist that his burden of production was
satisfied by his assertion of a Fifth Amendment privilege against selfincrimination. We have determined, supra, that Shadoian could not invoke a
Fifth Amendment privilege in refusing to produce these corporate records. Even
were the privilege applicable, however, a claim of a Fifth Amendment privilege
against compulsory self-incrimination may not "substitute for relevant
evidence" as to a present lack of possession or control. Id. at 761, 103 S.Ct. at
1554. As in Rylander, Shadoian's statement at the contempt hearing that he did
not possess the records and his simultaneous assertion of a Fifth Amendment
privilege constituted a failure to introduce any evidence and a failure to carry
his burden of production.
23

We affirm the order of contempt, committing Shadoian to the custody of the

United States Attorney General for a period of six months or until such time as
he produces the required records. If compliance with the order of enforcement
by producing the corporate records is factually impossible, Shadoian has the
burden of producing evidence satisfactory to the district court to show his
present inability to comply with that order, a burden which is not satisfied by
the invocation of a Fifth Amendment claim.

24

AFFIRMED.

The summons sought:

"All documents and records in your possession or control reflecting the receipt
of taxable income for the above-named corporation for the 3 year(s) ended
December 31, 1986 including but not limited to the following: records of gross
receipts and sales, dividends received from all sources, interest, rental and
royalty income, gains from dealings in property, recovery of bad debts deducted
in prior years, income from the discharge of indebtedness, and refund of taxes
deducted in prior years; records of deposits to and withdrawals and
disbursements from all bank accounts maintained by the above-named
corporation during the 3 year(s) ended December 31, 1986; costs of goods sold
and/or operations; beginning and ending inventory; method of valuating
inventory; compensation, wages, salaries, fees, commissions, and dividends
paid to officers, employees, independent contractors and stockholders,
(including property other than money); costs of repairs; and payment of taxes,
interest, rents, and contributions during 3 years(s) ended December 31,
1986...."

Shadoian argues that the district court did not make an express finding that the
corporate records existed. We think that the hearings before the district court,
both as to the order of enforcement and order of contempt, sufficiently indicate
the district court's conclusion that the records sought were corporate records
routinely expected to exist and to be in the actual or constructive possession of
the corporation's president. Transcript of hearing on January 8, 1988 at p. 6;
Transcript of hearing on April 1, 1988 at p. 14; 18; 23

Shadoian apparently sent a letter to the district court dated two days before this
second hearing which also stated affirmatively that he did not have the records,
but concommitantly contended that he had a Fifth Amendment right to refuse to
acknowledge or deny the existence of the records. This letter was not docketed
in the district court nor is it part of the record before us. This fact is of no
matter. Whether Shadoian first stated his non-possession, while also arguing
his right not to so state, at the second hearing or in a letter dated two days
before that hearing affects neither the reasoning nor the result in this opinion